Question Details

Use of the FIFO inventory valuation method 


True or false 
1.	If the unit price of inventory is increasing during a period, a company using the average-cost inventory method will show less gross profit for the period, than if it had used the FIFO inventory method.

	2.	If a company has no beginning inventory and the unit price of inventory is increasing during a period, the cost of goods available for sale during the period will be the same under the average-cost and FIFO inventory methods.

	3.	Use of the FIFO inventory valuation method enables a company to report higher net income when in a period of falling prices.

	4.	If a company changes its inventory valuation method, the effect of the change on net income should be disclosed in the financial statements.

	5.	In a period of rising prices, if a company uses the FIFO cost flow assumption, income tax expense will be lower than if they used average-costing.



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